Where does service revenue go in the accounting equation?

Accounting Dec 16, 2020

Expert Solution

Answer: Shareholder's Equity

Explanation:

Service revenue is an income statement account that increases the balance in shareholder's equity. Revenue is a temporary account that is closed out at the end of the accounting period to an equity account called retained earnings. Retained earnings is the profit earned over the life of the company. Revenue earned increases shareholder's equity and expenses incurred decreases shareholder's equity.

The accounting equation is calculated as:

Assets = Liabilities + Shareholder's Equity

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